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Accounting for IGCSE & O level - The Fundamentals Of Accounting (Section 23)

1
When is revenue recognized under accrual accounting?
Answer
(C)
When it is earned.
2
Which account is debited when a company records an entry to write off an irrecoverable account using the direct write-off method?
Answer
(B)
Bad Debt Expense
3
Which transactions will cause a decrease in the company's assets?
Answer
A
C
4
What is the correct journal entry for paying wages to employees?
Answer
(A)
Debit Salaries Expense, Credit Cash
5
What is the effect on the accounting equation when a company declares a dividend?
Answer
(C)
Assets decrease, Equity decreases
6
What typically decreases when a customer returns goods that were purchased on credit?
Answer
(A)
Sales Revenue
7
When preparing a bank reconciliation, what is the impact of an error where the company recorded a $50 check as $500?
Answer
(C)
Subtract $450 from the book balance.
8
What account is credited when a customer pays their account balance with cash?
Answer
(C)
Accounts Receivable
9
What is the purpose of opening entries in the general journal?
Answer
(B)
To record the initial assets, liabilities, and owner's equity of a business.
10
If a company receives cash in advance from a customer for goods to be delivered in the future, what happens to the financial statements?
Answer
(A)
Assets increase, and liabilities increase.
11
What is the correct journal entry when paying wages by direct debit?
Answer
(A)
Debit Wages Expense, Credit Bank
12
When a business offers a trade discount, how is the sale ultimately recorded in the accounting system?
Answer
(B)
At the net price after the discount.
13
When a business issues a cheque, which side of the bank column in the cash book is it recorded?
Answer
(B)
Credit side.
14
Which of the following is true when using the allowance method for bad debts?
Answer
A
C
15
Which of the following does *not* describe good credit control?
Answer
(D)
Offering no credit terms.
16
Which of the following statements is correct about the accounting equation?
Answer
(B)
Assets = Liabilities + Equity
17
What does a credit memo on a bank statement generally indicate?
Answer
(C)
An increase in the company's bank balance
18
What is the impact of writing off a bad debt on the income statement?
Answer
(C)
No impact.
19
When would it be appropriate to use the direct write-off method?
Answer
(C)
When the company is small and bad debts are not significant.
20
Which of the following errors *will* be revealed by a trial balance?
Answer
(D)
Errors where the debit is posted to an account and credit to another account.
21
What are the steps in preparing and checking a trial balance?
Answer
B
C
D
22
When a company declares and pays a cash dividend, what is the impact on the accounting equation?
Answer
(C)
Assets decrease, equity decreases.
23
What kind of accounts are the 'capital' accounts?
Answer
(C)
Personal accounts
24
What accounting error will NOT be revealed by a trial balance?
Answer
(B)
An error of omission.
25
How are errors made by the company treated in a bank reconciliation?
Answer
(C)
Added or subtracted from the company's book balance.
26
Which of the following typically have a debit balance?
Answer
A
C
27
Why is it advantageous to group similar transactions into different books of prime entry?
Answer
A
C
28
What type of transactions are recorded in the bank column of a cash book?
Answer
(B)
All bank transactions.
29
Which of the following are features of a purchases journal?
Answer
B
C
30
What is the relationship between a purchase order and an invoice?
Answer
(C)
The purchase order precedes the invoice.
31
What does the term 'drawings' represent in accounting?
Answer
(D)
Withdrawals of assets by the owner for personal use.
32
What does 'depreciation' represent?
Answer
(B)
The systematic allocation of the cost of an asset over its useful life.
33
What is the impact on the inventory when goods are returned to the supplier?
Answer
(B)
Decrease
34
Which of the following statements is true regarding accrued expenses?
Answer
(B)
They are expenses that have been incurred but not yet paid.
35
What impact does the payment of a supplier using cash have on the accounting equation?
Answer
(B)
Decreases assets and decreases liabilities.
36
Which of the following documents usually originate from the seller (supplier)?
Answer
A
B
C
37
What is the effect on the accounting equation when a company sells goods on credit?
Answer
(C)
Assets increase, owner's equity increases.
38
What is the normal balance of a revenue account?
Answer
(B)
Credit
39
What is a common method of showing trade discounts on an invoice?
Answer
(A)
By listing both the gross price and the discounted price.
40
If a trial balance balances, what is the implication?
Answer
(A)
The accounting equation is true.
41
What is the impact on the financial statements of using the allowance method for bad debts?
Answer
(C)
Assets and net income are presented more fairly.
42
Which of the following statements is true about a trial balance?
Answer
(B)
It helps to identify errors in the accounting records.
43
What will increase a company's assets?
Answer
A
B
44
What is the fundamental concept that guides the recognition of accrued income?
Answer
(C)
When the service has been performed or the good has been provided.
45
What is the purpose of a petty cash book?
Answer
(C)
To record small expenditures paid out of petty cash.
46
In the general journal, what side is used for debits?
Answer
(B)
Left
47
What type of document is used as proof of payment?
Answer
(C)
Receipt
48
What effect does an adjusting entry for accrued revenue have on the income statement?
Answer
(C)
Increases revenue.
49
When preparing financial statements, what order do the financial statements usually get prepared?
Answer
B
D
A
50
Which of the following activities typically results in a cash outflow for a company?
Answer
(C)
Purchasing equipment.